London dialogue opportunity for cooperation over confrontation

Editor's note: Xu Ying, a special commentator on current affairs for CGTN, is a Beijing-based international affairs commentator. The article reflects the author's opinions and not necessarily the views of CGTN.

While the China-U.S. economic and trade talk continued to the second day in London, expectations are tempered by realism but not devoid of hope. The world's two largest economies remain deeply intertwined – structurally competitive, politically divergent, yet economically interdependent. For global observers and stakeholders, the central question is not whether disagreements will persist – they will – but whether strategic dialogue can foster functional stability in an increasingly volatile international system.

In the current global environment, supply chains remain fragile, inflationary pressures are stubborn, and global growth is losing steam. In this setting, the significance of China-U.S. talks transcends bilateralism. It is about restoring confidence to a global economy that risks drifting into fragmentation without collaborative leadership from Washington and Beijing.

The resilience of national economies is no longer measured by headline GDP figures alone, but by structural robustness and policy agility. In the United States, deep-seated challenges are becoming increasingly visible. The Federal Reserve's recent Beige Book – the Summary of Commentary on Current Economic Conditions – underscores business concerns about policy unpredictability reaching its highest level since the pandemic began.

The Organisation for Economic Co-operation and Development's decision to downgrade U.S. growth expectations for 2025 from 2.2 percent to 1.6 percent reflects more than just a cyclical downturn; it signals a weakening of the country's structural momentum.

U.S. manufacturing is now said to account for approximately 8.4 percent of GDP, down from 28 percent in the mid-20th century. This long-term erosion has hollowed out domestic supply chains and eroded strategic depth in key sectors.

A case in point: nearly 80 percent of toys sold in the U.S. are imported from China, according to the U.S. Toy Association. This dependency has exposed American companies like Mattel and Hasbro to policy-induced volatility. Tariff fluctuations have raised their operational costs and disrupted inventory planning – symptomatic of a broader vulnerability.

In contrast, China has adopted a multidimensional toolkit to navigate complexity. Its policy framework – emphasizing institutional opening and structural reform – has injected a degree of predictability into an otherwise volatile global landscape. Measures such as the dynamic tariff quota adjustment mechanism and the expanding coverage of the Cross-border Interbank Payment System that facilitates cross-border renminbi payments and trade have helped Chinese firms hedge external risks.

Simultaneously, China's strategic reserves in energy and food have buffered price shocks, ensuring domestic inflation remains modest despite global volatility.

Crucially, China's economic resilience lies in its hybrid growth model. With unmatched manufacturing capacity – comprising 41 major categories and over 600 subcategories, and retail sales crossing RMB 4 trillion in the first quarter of 2025, China possesses the rare and unique ability to activate both domestic and international circulations. Platforms like cross-border e-commerce pilot zones and regional trade agreements such as the Regional Comprehensive Economic Partnership have enhanced its flexibility.

The re-emergence of structured dialogue marks a vital departure from the "decoupling" narrative that has dominated recent years. There is growing awareness – on both sides – that attempts to sever economic ties come at high systemic costs.

A McKinsey report estimates that building resilient China-U.S. supply chains in areas like semiconductors and green technology could lower global industry costs by 15-20 percent. Seen from this vantage point, economic talks are not simply a gesture of goodwill but a rational response to shared exposure.

Yet there are entrenched challenges. Washington's dual-track strategy of competition and selective cooperation is unlikely to change fundamentally. The decline in U.S. semiconductor exports to China in 2024, due to restrictions under the CHIPS and Science Act, underscores the enduring strategic mistrust.

Meanwhile, frameworks such as the Indo-Pacific Economic Framework for Prosperity led by the U.S. that excludes China aim to rewrite trade rules in ways that could marginalize Chinese participation.

U.S. domestic politics further complicate matters. U.S. industrial policy, while politically resonant, has created tensions between different sectors. Midwestern farmers continue to depend heavily on the Chinese market while small manufacturers struggle with elevated input costs and lackluster Purchasing Managers’ Index figures. Such internal contradictions may cause inconsistency in Washington's negotiating posture.

What is at stake in the dialogue is more than tariff adjustments or product exemptions. It is the ability of two global economic engines to function as stabilizers rather than disruptors. If even modest progress is achieved – such as selective tariff reductions or renewed agricultural purchase agreements – the positive spillovers would be immediate.

For instance, removing electric vehicle (EV) component tariffs could reduce Tesla Shanghai's U.S. export costs by 12 percent, potentially lowering global EV prices by 5-8 percent.

In an era where uncertainty has become a structural feature of the international system, the China-U.S. economic dialogue is an indispensable mechanism for restoring a measure of predictability. The core premise is clear: competition need not exclude cooperation, and interdependence, if managed wisely, can be a source of stability rather than vulnerability.

Ultimately, no country can build lasting prosperity behind walls. The London dialogue offers a timely opportunity not to solve all problems at once, but to signal that even in an age of uncertainty, cooperation remains possible and necessary. In doing so, the world's two largest economies can chart a course toward strategic coexistence, pragmatic engagement, and shared responsibility in a turbulent world.

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